For anyone planning to go solar, watching the electric savings roll in once your system is set up is the best part.
But what you absolutely can’t forget about are your installation costs.
When starting your solar journey it’s easy to forget that there are a lot more things that influence your costs than just your solar panels. For instance, besides the actual solar equipment, the area where you live and your energy needs also determine how many panels you’ll need and consequently, how much you will need to pay for your solar installation.
But even though the typical cost of a solar install is around $25,000, depending on the financial incentives available to you, you could actually end up paying less for your system.
That’s why in this article we will explore the different factors that affect the cost of your solar panels in 2025 as well as a case study example to give you a better idea of some tangible solar install costs. Understanding your solar costs gives you a strategic advantage that will help you be financially prepared for solar and will help you make the right decisions so you can get the maximum return possible from your solar panels.
What factors impact the cost of your solar panels?
Besides the solar panels themselves, there are outside factors that contribute directly to your solar system’s size and ultimately, how much you will pay for your panel installation.
Your energy needs
The size of your solar system directly correlates with your electricity consumption. So the higher your energy needs, the more panels you will need. And needing more panels will raise the price of your install. However, if you’re smart about your electricity usage and you rely on energy-saving appliances, a smaller system could do the trick for you, which would help reduce the price tag of your installation.
Your roof’s condition
The simpler your roof is, the cheaper your install!
But really, if your roof has an intricate design and lacks the proper pitch, this can make your installation way more complicated. Additional tools and labor will be needed to tackle these issues which will increase your final cost. Moreover, have your installer make sure that your roof has the correct angle and sun exposure (ideally, it should be south-facing with a 30-degree slope). If it doesn’t, the removal of whatever might be blocking your roof’s sun exposure for example, will bring additional charges to your bill.
Your location
In states like Arizona or California where sunlight is abundant, residents often have high electricity needs due to their increased air conditioning use. But since these areas receive lots of sunlight, solar panels installed there are highly efficient and produce more energy than in cloudier areas. This also means a slightly smaller system can still support a home’s energy needs relatively well.
A Breakdown of Installation Costs for a 5kW Solar System in Philadelphia, PA
Here is a breakdown of different components involved in a typical solar installation, as well as estimated costs for a 5kW system priced around $25,000.
Equipment
- Panels and inverters: absorb solar energy and convert it into power for your home
- Mounting and racking: secures your panels to your roof
Labor
- Installation: what it costs to get the system installed by professionals
Soft Costs
- Planset, design and roof survey: inspections and design survey done before the install
- Permitting and interconnection: utility or state approvals
- Sales and marketing: marketing expenses to reach new customers
- Overhead: office expenses like administrative costs and insurance
Profit
- Profit: company’s earnings after other costs have been covere
How do tax credits and incentives affect your solar costs?
The estimated initial cost of installation might sound a bit intimidating but thankfully financial incentives can help alleviate these costs. For instance, the 30% federal residential tax credit is a prime incentive for future solar owners as it lets you claim 30% of your system’s costs off your federal income tax return. So if your solar system costs you $20,000 for example, you would be eligible to recoup $6000 from your system’s overall costs. Please note that following President Trump’s passing of the “Big Beautiful Bill” into law, the residential tax credit will be ending on December 31st, 2025, raising the cost of solar installations by 30%. So now is the time to start the process to guarantee these savings for your household or business.
Besides the federal tax credit, there are other incentives available to help bring down your solar expenses. SRECs, for one, provide an additional income stream for solar owners if they choose to sell excess energy produced by their panels to utilities. And state incentives like the New York 25% tax credit or the Pennsylvania PECO $500 rebate are some strong options to keep in mind as well. Just check with your utility or municipality to see what local incentives you might qualify for.
What also makes your solar investment even more worthwhile is “stacking” your incentives to maximize your financial returns from going solar. So for example, you could claim the federal tax credit AND a state tax credit. Keep in mind that if you stack utility or state rebates with the federal tax credit, they reduce the amount that you can claim for the federal tax credit. So basically, the value of the rebates must be deducted from your total solar costs before the credit can be applied (regardless of when you claim the rebates). For example, if your system costs $20,000 and you receive a $2000 utility rebate, your total costs will come down to $18,000. After you apply the 30% federal credit, you will save $5,400 instead of $6000. This only applies to rebates but not tax credits or performance-based financial incentives like SRECs or net metering. Depending on your jurisdiction, state rules and utility, you may be able to claim all incentives available in your area or only specific ones.
Every future solar owner needs to be well prepared for the financial implications of going solar. Thankfully, understanding your solar costs in 2025 gives you the knowledge you need to make sure that going solar is right for you. If you are ready to learn more about our rooftop solar solutions, sign up for a consultation and a member of our team will provide you with all the information you need.